Why Snowflake (SNOW) Shares Are Getting Obliterated Today

What Happened:

Shares of data warehouse-as-a-service Snowflake (NYSE:SNOW) fell 12.4% in the morning session after the company reported second-quarter earnings results. Its billings unfortunately missed analysts' expectations by a pretty large magnitude. Since billings can be a leading indicator of revenue, this is a negative for topline trends. On the other hand, Snowflake beat analysts' revenue and adjusted operating income expectations. Overall, this quarter could have been better.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Snowflake? Access our full analysis report here, it’s free.

What is the market telling us:

Snowflake’s shares are quite volatile and over the last year have had 16 moves greater than 5%. But moves this big are very rare even for Snowflake and that is indicating to us that this news had a significant impact on the market’s perception of the business. 

The previous big move we wrote about was 20 days ago, when the company dropped 5.9% as major indices declined (Nasdaq down 2.3%, while the S&P 500 index fell 1.9%) on fresh concerns about the strength of the economy after the Bureau of Labour Statistics reported non-farm payrolls for July 2024, which revealed that the U.S. economy added 114 000 jobs (versus expectations for +179,000 jobs). In addition, the data revealed that the unemployment rate rose to 4.3%, the highest since October 2021. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

Snowflake is down 37.7% since the beginning of the year, and at $117.42 per share it is trading 50.2% below its 52-week high of $236 from February 2024. Investors who bought $1,000 worth of Snowflake’s shares at the IPO in September 2020 would now be looking at an investment worth $463.63.

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